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(Source: Wil Readinger | Illustration by Linda Peia)

Hans Eysenck, one of the 100 most eminent psychologists of the 20th century, wondered whether people’s understanding of their astrological sign might influence how well their personality reflected the traits associated with it. His hunch was spot on; only those individuals who were familiar with their sign exhibited the personality predicted by their sign. In another study, psychologist Richard Wiseman invited a group of students out for drinks. By end of the night, everyone failed to pass a range of sobriety tests. What the students did not know was that some of them had been served non-alcoholic drinks.

So what do entrepreneurs have in common with horoscope readers and ‘drunk’ students? In both studies, beliefs were enough to convince participants to act in a particular way. Could the same apply to entrepreneurs? To find out, I talked to Bailey Klinger, CEO of the Entrepreneurial Finance Lab (EFL), which has designed a proprietary psychometric loan application that predicts the business performance and credit worthiness of entrepreneurs based on their attitudes and beliefs, intelligence, business skills, and character.

The application’s primary users are banks, who can use the questionnaire to identify high-potential entrepreneurs who would not otherwise qualify for credit based on standard considerations of collateral, credit history, and business plans. These underserved entrepreneurs represent a $2+ trillion market (see “the missing middle”). With their revolutionary approach, incubated at Harvard University, EFL is one of the few organizations equipped to tap into this market at scale.

I asked Klinger whether any traits have been found to influence entrepreneurs’ performance, and if so, which are most powerful. Though it is difficult to generalize across countries and business types, two consistent features were self-efficacy – belief in one’s ability to succeed, and conscientiousness – associated with self-organization and hard work. It is not by chance that these two are important and in fact, they are interdependent.

Self-efficacy is necessary. “There are so many failures even hard working entrepreneurs can experience before quitting, if they do not believe in themselves” explains Arel Moodie, Partner at Empact, an organization that focuses on developing a culture of entrepreneurship. Wil Readinger, Principal Scientist at Cognitivity, a consumer cognitive science research firm, names this group of people gurus – people who do not typically choose to be entrepreneurs but “are comfortable providing their expertise to support entrepreneurs in turning ideas into profitable products and services.”

However, self-efficacy is not sufficient. Entrepreneurs who believe in themselves, but do not invest the time and effort to build their venture do not last long. These people “tend to spend more time impressing other people than learning from them,” Moodie observes. “We encourage our entrepreneurs to seek market feedback from day one because learning is critical to their success,” adds Ovidiu Bujorean, Manager at GIST and MIT Sloan Entrepreneurship alumn. Indeed, a study by Startup Genome found that entrepreneurs that surround themselves with mentors and thought leaders “raise 7x more money and have 3.5x better user growth”.

And learning is not just about understanding your field of work. It is also about understanding your own limitations. During a presentation at the MIT Development Ventures, Wilton Agatstein, former VP of Intel, shared a question he would ask his team: “give me five reasons why others have failed to do this and five reasons why you will succeed.” This is a question we can all make a habit of asking ourselves because self-efficacy is effective only as long as it represents a realistic assessment of our abilities.

All that to say: don’t just do it, believe it! But don’t allow yourself to be blinded by your beliefs.